(Bloomberg) — Chinese curbs on exports of three niche metals to the US have already rattled the market. Now, a bigger clampdown looks set to have far-reaching ramifications for supply chains feeding American defense and chip-making industries.
Beijing this month slapped a ban on US-bound exports of gallium, germanium and antimony in a tit-for-tat move in a technology trade war. The metals are important because they have crucial uses in many Western industries from military tech to semiconductors to satellites.
The ban may seem symbolic at first, given restrictions imposed more than a year ago had wiped out direct exports of Chinese gallium and germanium to the US. That pushed up prices and made it harder for traders to source buffer stocks. Yet panic levels are rising, because this time Beijing could crimp supplies further with rules prohibiting foreign companies and countries from helping US manufacturers to evade the controls.
For instance, the measures could prevent international firms from reprocessing Chinese gallium, germanium and antimony in third countries, and then selling those products into the US.
End buyers of those metals — such as the chip, aerospace and defence sectors — may have little choice but to try to use less, recycle more or strike deals with the few Western companies who can potentially start new production. There are also worries that other critical materials could be targeted if tensions escalate.
Chinese metal that has been reprocessed elsewhere and re-routed to the US has offered a lifeline for American manufacturers, particularly in the gallium market. But those flows will probably dwindle as suppliers fear reprisals from Beijing, according to people with knowledge of the trade, who asked not to be identified due to the commercially sensitive nature of the matter.
The tiny size of those markets and limited companies participating in them mean such sales would be easy to track, and being blacklisted by China would have huge repercussions for firms involved, the people said.
It will be relatively easier for China to stop gallium shipments via third countries, given it’s a niche market, said Uchi Wakaaki, director of overseas business at Wing Co., Japan’s largest importer of the metal. Wing’s imports from China have halved this year due to the knock-on impact of trade curbs, he said.
